January 17, 2018 - This Policy Insight was written by a group of independent French and German economists with differing views and political sensitivities but a shared conviction that the current deadlock must be overcome. Reform of the euro area is needed for three reasons: first, to reduce the continued vulnerability of the euro area to financial instability;second, to provide governments with incentives that both encourage prudent macroeconomic policies and deliver growth-enhancing domestic reform; third – and perhaps most importantly – to remove a continuing source of division between euro area members and of resentment of European institutions such as the European Commission and the ECB, which has contributed to the rise of anti-euro populism and which could eventually threaten the European project itself.